Two years’ jail for Goldman Sachs head

Sentenced . . . Rajat Gupta leaves Federal Court on Wednesday, on his way towards two years in prison.
Photo: Reuters

by
Patricia Hurtado

Former Goldman Sachs director Rajat Gupta was sentenced to two years in prison for insider trading, marking the downfall of a man who rose to the top of corporate America after being orphaned as an 18-year-old in Kolkata.

Gupta, who ran McKinsey & Co from 1994 to 2003, was sentenced by US District Judge Jed Rakoff in Manhattan for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam.

Gupta, 63, was convicted in June of securities fraud and conspiracy. He is set to report to prison on January 8. He was also fined $5 million.

The evidence that Gupta passed illegal information about Goldman Sachs to Rajaratnam was “not only overwhelming, it was disgusting in its implications", Judge Rakoff said in court before handing down the sentence.

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Gupta requested probation and community service, and his lawyer had proposed that he work with needy children in New York or the poor in Rwanda.

In his 17 years as a judge, Judge Rakoff has sentenced at least nine defendants other than Gupta for insider trading, including seven who pleaded guilty and two whom he jailed after they were found guilty by juries.

Judge Rakoff has a track record of imposing sentences that are half what the government recommends.

Gupta served as a top adviser to the foundations of Bill Gates and Bill Clinton and is the most prominent figure to face prison in the government’s crackdown on insider trading.

In a statement, the United States attorney in Manhattan, Preet Bharara, said of Gupta, “His conduct has forever tarnished a once-sterling reputation that took years to cultivate. We hope that others who might consider breaking the securities laws will take heed from this sad occasion and choose not to follow in Mr Gupta’s footsteps."

The Justice Department’s campaign has reached onto the trading floors of some of Wall Street’s largest hedge funds and inside the most revered boardrooms of corporate America. Over a three-year stretch, more than 70 traders, bankers, lawyers and corporate executives have been convicted of insider trading.

A graduate of Harvard Business School, Gupta rose swiftly through the ranks of McKinsey and headed the firm for a decade. He was a trusted adviser to captains of industry, including Henry Kravis of the private equity firm Kohlberg Kravis Roberts & Company and Peter Dolan, the former chairman of Bristol-Myers Squibb. A noted humanitarian, he has also played a leading role in organisations fighting diseases in poor nations.

Gupta is one of 23 criminally charged in a seven-year insider trading conspiracy orchestrated by Rajaratnam, who was convicted in 2011.

In May, a jury found Gupta guilty of providing Rajaratnam with advanced word of secret, market-moving news he learned as a Goldman director.

Gupta’s sentence is far less than the 11 years being served by Rajaratnam in a federal prison. But it is in line with prison terms handed down by Judge Rakoff in other recent insider trading cases.

The judge rejected the recommendation from Gupta’s lawyers for a sentence of probation combined with a “rigorous and lengthy program of community service" that included a proposal to work in Rwanda on a health program to combat HIV.